CRISIL: Feast Only Just Beginning for MSMEs in Broiler Farming

INDIA - CRISIL expects the credit profiles of micro, small and medium enterprises (MSMEs) engaged in the broiler farming business to improve in fiscal 2018.

According to Business Standard, a surge in demand resulting from growing disposable incomes and acceptability of chicken and eggs as sources of protein, coupled with the fact that broiler meat is more affordable compared with other meats, has made poultry one of the fastest growing segments in the agricultural sector.

The closure of cattle slaughter houses in a few states has also boosted demand and led to an increase in prices of poultry chicken over the past year. Per capita consumption remains low, suggesting much headroom for growth.

Another favourable turn is seen in poultry feed, which accounts for a little more than 70 per cent of these MSMEs’ cost of sales, making their operating margins highly susceptible to fluctuations in raw material prices.

In fiscal 2017, these players benefited from a reduction in feed prices due to bumper crop harvests and sluggish exports of maize and soyabean.

Given favourable monsoon prospects, feed prices are expected to remain favourable in fiscal 2018 as well.

Higher price realisations and lower input costs are expected to push up operating margins for CRISIL-rated MSMEs in this segment to nine to 10 per cent during the year, compared with seven to eight per cent in fiscal 2016.

What’s more, CRISIL believes muted input prices and improved realisations will also ease the working capital requirements of these players.